Oil prices rose on Tuesday as traders bet on stronger fuel demand in China, the world’s biggest oil importer, but were limited by worries that new U.S. sanctions against Russia could cut global supplies.
The price of Brent crude, the international benchmark, rose 0.8%, to $55.63 a barrel, while U.S. West Texas Intermediate (WTI) crude was up 0.4%, at $52.13 a barrel.
The gains came as traders bet on strong demand from China, where the economy is expanding faster than expected, and from other countries in Asia and Europe. China’s economy grew 6.5% in the fourth quarter of 2020, the fastest pace in more than two years.
At the same time, traders are worried that the U.S. sanctions against Russia could hit global supplies. The U.S. imposed sanctions earlier this month on five Russian companies involved in oil production and trading, as well as three individuals, in response to what the U.S. said was Russian interference in U.S. elections.
The sanctions have raised concerns that they could disrupt global oil supplies, as Russia is the world’s second-largest oil exporter. The sanctions could also hamper Russia’s ability to invest in its energy sector, leading to lower production in the future.
Oil prices are also being supported by OPEC+ production cuts. The cartel, which includes most of the world’s major oil producers, agreed last week to extend its production cuts until April. The deal is expected to result in a further reduction of 1 million barrels per day in global supplies and should help to support prices.
Overall, the outlook for oil markets remains positive, with traders expecting demand to improve as the global economy recovers from the pandemic and supply concerns to keep prices supported.
The current situation in the oil markets is an interesting one, with strong demand from China and other countries in Asia and Europe offsetting supply concerns from U.S. sanctions against Russia. The extension of OPEC+ production cuts is also likely to help support prices in the near term. Despite these factors, the market remains volatile and traders should watch for any further developments that could affect supply and demand in the future.